Acceleration Clause
Standard Definition
A mortgage clause that allows the lender to demand immediate payment of the entire loan balance if the borrower defaults on covenants like monthly payments.
Detailed Examination Analysis
The Acceleration Clause is a critical provision in mortgage notes and deeds of trust. Under normal conditions, a mortgage is repaid over a long period (e.g., 30 years). However, if the borrower violates contract terms—most commonly by missing multiple consecutive payments, failing to maintain hazard insurance, or failing to pay property taxes—the lender has the right to 'accelerate' the debt. This means the entire outstanding principal balance plus accrued interest becomes due and payable immediately, bypassing the standard monthly schedule. If the borrower cannot pay this full accelerated sum, the lender can initiate foreclosure proceedings.
Real-World Examination Scenario
"A homeowner misses three consecutive mortgage payments. The lender invokes the acceleration clause, demanding the entire remaining balance of $210,000 within 30 days. Because the homeowner cannot pay this full sum, the lender initiates a foreclosure sale."
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